» As Europe pushes competition in the railway sector, the role of the public enterprise slowly fades away.
The first threat came earlier this year, when French national railway operator SNCF signaled that it was considering cutting some TGV high-speed train routes between the nation’s regional capitals. Facing increasing track use fees and the economic recession, one in five TGV services now lose money, and SNCF seemed ready to stop operating direct services from Bordeaux, Nantes, and Lille to Strasbourg. Many people hoping to travel from destinations in the eastern part of the country to the west would have to transfer in Paris.
Still under the control of the French government, however, SNCF announced that no TGV services would be cut, and that the rail company would have to find ways to increase ridership or cut services elsewhere. For regional officials across the country, this was a relief, a sign that the nation’s rail transport would continue to serve as an engine for universal mobility, not simply for the movement of Parisians.
Yet with European regulations altering the role of the public railway across the continent, the decision the SNCF almost made no longer appears like an aberration — rather, it probably will be the future norm. That’s because European regulators, focused on increasing competition in areas of former public monopoly, have asked SNCF to abandon its public enterprise status by July 2010, or the French government will be penalized for handing out an illegal subsidy. With France’s formerly publicly owned gas, electricity, and aviation companies now private, the pseudo-privatization of SNCF would be just another example of the liberalization of trade in what can only be described as a now market-obsessed Europe.
With none of the public and political pressure to maintain high-speed service between regional capitals, SNCF seems likely to move away from any operations that aren’t money-making once it separates fully from the public envelope. The result will be a general decline in service along less-used routes — a depressing outcome for a system that has developed so well over the past few decades.
Because of decrees by the Brussels-based European Union, France no longer has the ability to make independent decisions about how to operate its railways but instead must follow free-competition rules supposedly designed to improve the efficiencies of the railway market and reduce fares for customers. This represents major a change, especially in France.
The rail network was once operated under public monopolies across Europe, with national operators controlling each individual market and international routes the subject of intense negotiation and agreements between countries. This system had a number of benefits, notably in France, where SNCF was conceived as a service providing more than simply transportation, but also societal equalization, befitting its designation as a public enterprise. The company has reduced fares for children, young adults, seniors, and large families — as a matter of social concern. The operator offers high-speed tickets at cheap prices compared to comparable services in Germany, Spain, or Italy — a policy that has resulted in highly frequented TGV trains and a general equality in train service for people of all income classes. There are no slow, poor-person trains on routes where TGVs are offered.
The lack of competition also allowed SNCF to transfer profits from its TGVs to subsidize Corail routes, which provide national intercity services on routes that don’t yet offer high-speed trains.
But the success of the SNCF in running the French railway network has not been adequately appreciated by European officials (or by conservative French President Nicolas Sarkozy), who have made a conscious decision to emulate the British rail system, which has been open to competition since 1994. That network, in which track ownership (sometimes public, sometime private) is separated from private train operations, has extensive failings. An effort to use public-private partnerships to construct the United Kingdom’s first high-speed line resulted in a bankruptcy in which the state had to bailout the creditors and take the losses. The recession pulled several private operators out of business, leaving the state to take command of several money-losing routes.
It’s hard to see the British example as anything other than a racket designed to transfer profits into the private sector and force the public sphere to absorb losses. And yet European officials are adamant that the continent’s more successful rail systems follow in its example.
France made the first step in that direction in early 1997 with the creation of the public Réseau Ferré de France, which took control of the nation’s rail network from SNCF, leaving the company involved in operations alone, paying RFF for the rights to use tracks and opening the way for competition from other companies. This allowed SNCF to make large profits, since it was no longer required to take on debt for the construction of expensive new rail lines. But the creation of RFF immediately established a conflict of interest between operator and track owner: one is intent on paying back the costs of high-speed lines, whereas the other has pursued a socially equitable policy in the distribution of transportation resources.
As a result, RFF has been increasing track use fees significantly over the past few years. As a bureaucrat at SNCF put it: “We’re stuck: we’re asked to make money. But the tolls paid to RFF to run TGV services keep going up. At the same time, we’re asked to keep running trains, even when they lose money.” Between 2005 and 2013, RFF will increase SNCF track fees from €1 billion to €2.2 billion, enough to destroy the operator’s profit and eventually push it into bankruptcy unless the government comes to its aid — unlikely considering European regulations. RFF, meanwhile, made a profit in 2009.
At the same time, SNCF faces increasing competition from private and foreign operators that plan to make a play for the lucrative French market beginning as early as this year. They are expected to be able to offer competitive services because their employees lack the employment protections and good pay SNCF workers have earned after years of negotiations and strikes. That said, these competitors will have significant start-up costs, including the not-exactly-cheap purchase of new high-speed trains.
The French government has made a commitment to aid the company whose days as a public protectorate seem short-lived. Money-losing Corail trains, which cost SNCF €150 million a year, are to be contracted out to SNCF by the state, similar to the way the TER regional rail operations are now run by each of France’s 22 regions. This will make the company’s only non-governmental services the TGV lines.
Because of the RFF’s high track fees, a newly profit-motivated SNCF is likely to abandon corridors that are marginal, including those region-to-region routes that almost saw the axe this year; most TGV services seem likely to be relegated to routes with destinations in Paris, Lyon, or Marseille, the country’s three biggest cities. This in spite of the fact that many peripheral regions expected to see declining services contributed directly to the construction of new high-speed lines. But now that RFF and SNCF have completely opposing motivations, it doesn’t matter, since track construction ownership is separated from operations. Regions can no longer assume service expansion to be the expected result of investing in new routes.
In addition, SNCF seems unlikely to continue offering the deep discounts to the young and old it can currently provide, since it will now be focused on providing more expensive profit-building business trips between the country’s biggest cities, routes that will face increasing competition from other operators in the future. If those benefits are to be extended, they will have to be subsidized by the state.
In many ways, these new European regulations put into question the French model of social equity in rail services; the manner in which competition is being pursued will fundamentally transform the role and goals of the SNCF. It’s difficult to conceive of a way in which this will produce general improvements in service for the country’s population.